CHAPTER 2

Investment Returns and Investment Principles

As an individual investor, you have access to many different types of investments, ranging from education (which is an investment in your human capital) to shares in publicly traded companies (i.e., stocks). What matters for investors is the return over time from those investments. This chapter reviews the calculation and behavior of returns. The focus is on returns on investments in stocks and bonds, which form the basis for much of our wealth accumulation, while later chapters cover real estate and various insurance products.

The main objectives for this chapter are:

Explore investment returns of stocks and bonds, including how returns behave across securities and time.

Learn some basic ...

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